Development Orientations of Layer 1 & Layer 2

In the Crypto market, there will be two general development directions: non-EVM and EVM. The fact that we can observe the development direction of Layer 1 and Layer 2 helps us have specific criteria to evaluate whether these projects are developing properly or not? From there, investment decisions are relatively clear.

And in today’s article, we will review some outstanding development directions from which we will select common success criteria in the crypto market.

Non EVM & EVM

Define

EVM Full term of Ethereum Virtual Machine, refers to blockchains aiming to be similar to Ethereum in terms of Sodility and Vyper programming languages, especially Sodility. With EVM compatibility, projects on Ethereum can easily develop on these L1s by copying the code and then making more or less tweaks depending on the level of compatibility. operates on that L1.

Non-EVM are blockchains that are not EVM compatible it uses a different programming language. Developers on Ethereum who want to develop their projects on these non-EVMs are required to learn a new programming language, which leads to building a project on a non-EVM takes a lot of time.

For example: You are living in Vietnam, everything around you must use Vietnamese but suddenly you have to go to France. It’s almost like you start from scratch when you have to relearn the language to be able to find a job here. So here the programming language will be similar to Vietnamese or French.

That’s why non-EVMs need a lot of time to develop and must have direct impacts to attract developers to their ecosystem.

For projects that are both non-EVM and EVM, people imagine that Layer 1 of the project is non-EVM, but because they want to attract projects on Ethereum to expand through their blockchain without spending too much money, they They built 1 Layer 2 which is an EVM Blockchain with the above mission.

Eg:

• Near Protocol is a non-EVM because it uses the main programming language Rust, and recently they have added Javascript support. Because Near Protocol wants to attract large projects on Ethereum or projects specializing in multichain development such as Aave, Uniswap, Curve Finance,… they decided to deploy Aurora as a Layer 2 highly compatible with EVM from which projects Projects on Ethereum are easily built and developed on Near Protocol through Aurora.
• Avlanche is an Internet Of Blockchain concept, but in the beginning, instead of aiming at IOB, they decided to build an EVM Chain, which is Avalanche C Chain, so it attracted many big names such as AAVE, Curve Finance,. .. They have been very successful with this strategy but in terms of their main vision there is nothing special.

Exception

In the above cases, the core team is the one who proactively builds the EVM Chain, but there are also projects where the developers are the ones who proactively develop the EVM Chain.

Eg:

• Neon Labs is an EVM Blockchain on Solana, but although it has been teased since December 2021, the project still has no trace.
• Nitro Labs is an SVM on Cosmos. This means that Nitro Labs supports projects on Solana that can be developed on Cosmos easily instead of having to build a completely new blockchain.
• EvMos is also a product of the developer team on the Cosmos ecosystem, helping projects on Ethereum easily expand through Cosmos.
• Similar to EvMos, we have Polkadot’s Moonbeam or Moonriver on Kusama.

Criteria to Help Non – EVM Blockchain Succeed

Typical of a Blockchain platform developing in the direction of Non – EVM is Solana and recently emerging is StarkNet.

The most outstanding features of Solana are:

• Solana must have full infrastructure such as Oracle, API, Wallet,… so that projects can run immediately after construction.
• Hackathon Global. Twice a year, each Solana hackathon attracts tens of thousands of developers and hundreds of new projects after the hackathon. Solana’s hackathon cost is $5M/hackathon.
• Solana’s Hackathon Offline – Hacker House event takes place regularly in many big cities in many different countries.

What supports developers the most is programming tools and grants from hackathon programs that help projects have an initial launch pad.

So when you look at non-EVM-oriented Blockchain platforms, you need to observe the support of the development team in terms of support and answers, is it quick and enthusiastic? Do offline and global hackathon events take place regularly? Is the number of participating developers large? After each hackthon, does the number of participating developers increase significantly? Is the number of projects exploding? Do all parameters grow after each hackathon? Does hackathon take place regularly?

Besides, for a ecosystem to explode, does it need to build projects that belong to current or upcoming trends? Do the projects being built and developed have any unique inovations or are they just forks from existing projects?

From answering the above questions, we can answer whether the project is being built, developed and has the potential to succeed or not?

After Solana, I am currently looking at StarkNet products from StarkWare.

Criteria for EVM Blockchain Success

In fact, EVMs have quite different ways of success, so let’s go into specific cases together.

BNB Chain

First is BNB Chain, the success of BNB Chain comes from its creator CZ. With his magic hands CZ has created his own ecosystem without being too dependent on multichain projects.

One of the most exciting activities that CZ created to attract developers is The Most Valuable MVB program, there have been many projects successfully incubated from this program.

The most prominent in the BNB Chain ecosystem is Pancakeswap. According to some unofficial information, this is a product of the Binance team built and developed to lead the DeFi trend across the entire ecosystem. at that time. And up to now Pancakeswap is still the most prominent product on the BNB Chain ecosystem in terms of revenue, activities, users, TVL,…

To understand more about how Pancakeswap became successful. You can read this article to understand more about this project:

Series 5: Real Builder in Winter | PancakeSwap – Changpeng Zhao’s Good Son

Up to now, CZ has been relatively successful in steering both the DeFi and CeFi boats. However, the BNB Chain ecosystem is not without weaknesses as the number of projects that bring real innovation to the market is almost non-existent.

Avalanche

Clearly, Avalanche had a successful strategy by not focusing on developing the Subnet from the beginning, but doing so would have been very time-consuming. Grasping the market trend of EVM Blockchain, Avalanche immediately focused on its C Chain as a highly EVM compatible blockchain.

The good thing about Avalanche is that they have extremely potential native projects right from the start, not multichain like Trader Joe, Pangolin, BenQi. Then, with the combination of Top Tier DeFi such as AAVE, Curve Finance, Uniswap and incentive packages, Avalanche C Chain’s ecosystem truly exploded.

Avalanche’s success comes from its business acumen in knowing what the market trend will be and being prepared to capture it.

Avalanche’s incentive programs do not amount to hundreds of millions or even billions of dollars like ecosystems, but they are extremely effective in attracting users and TVL.

Up to now, a number of projects on Avalanche are also developing very actively such as:

Series 4: Real Builder in Winter | Trader Joe – From a Follower to a Leader

Recently since Avalanche Market has just begun the first steps to complete its Internet Of Blockchain vision with Subnet. Although it attracted DeFi Kingdom from Harmony to its ecosystem.

Arbitrum

Although Arbitrum is not an L1, it is also a development-oriented L2 according to EVM Blockchain. One of the criteria that helps Arbitrum somewhat surpass Optimism is:

1. About how to attract projects

With Arbitrum, they welcome all projects to them, and with Optimism, they are more careful that projects are required to KYC if they want to develop on Optimism. Because of this difference, among the two best Optimistic Rollup Chains, most developers will choose Arbitrum when their information is not too public.

2. Integration with exchanges

Withdrawing money from L2 to L1 initially takes a lot of time, leading to missed investment opportunities in other ecosystems. This makes withdrawing and depositing directly with the exchange will solve all of the above problems and Arbitrum is much faster than Optimism in connecting to large exchanges like Binance.

From there, users can easily access and use projects on Arbitrum.

3. Choose the correct tip

If you look at the Optimism ecosystem, there is no specific spearhead. They have all the puzzle pieces related to DeFi, NFT, Gaming, Web3, but there is no outstanding puzzle piece or project.

But looking back, Arbitrum has its own Derivative group with two pincers: GMX under Perpetual and Dopex under Option. And they pushed extremely hard to build liquidity for GMX through Vovo Finance, Rage Trade,…

Everyone can understand the details of the game on Arbitrum and Real Yield through the following article:

What is Real Yield? New Breeze for the DeFi Market

Arbitrum Ecosystem & Real Yield Movement

Optimism

Recently, Optimism has been relatively successful in a short period of time, at one point surpassing Arbitrum. And this is Optimism’s formula for success in the crypto winter.

• Airdrop thousands to tens of thousands of dollars to attract the attention of the entire market.
• Launching the token is accompanied by creating an incentive program, meaning projects use OP tokens to implement the Liquidity Mining program to attract users.
• Joining hands with the big guy here is AAVE to attract AAVE’s user and fan community to its ecosystem.

However, the success of Optimism does not last long as the highlight of Optimism is incentives and when incentives show signs of exhaustion, it is also time for users to abandon the ecosystem.

Summary

In the future, I firmly believe that whether there is a new L1 or a new L2, the main direction will be based on non-EVM or EVM. The most important thing we need to clearly see is which path L1 or L2 is following? How did their strategy develop? And from there make your own investment decisions.

In addition, when non-EVMs explode, it is likely that some type of xVM will be born. For example, Solana is increasingly popular, so a few projects have started to deploy SVM (Solana Virtual Machine).